It is very easy to understand the basics of Forex trading and start trading the market. However, it is very difficult to come up with a single trading strategy that will allow you to invest in the long term. How to achieve this seemingly impossible goal?
There are basically two different methods that can be used.
The first method is to try to create a simple trading system, and its winnings outweigh its losses. In other words, you have designed a basic system that uses the same target price and stop loss, such as 10, 50, 100, or 200 points.
The main benefit of this strategy is that you only need to establish a system with a success rate of 51% or higher to make money. This is actually very easy to implement because by using some technical indicators and/or using key support and resistance levels, you can push the odds to more than 50%.
The second method You can try to think of a system that uses an emergency stop, but expect to gain more than a stop loss. For example, you use a 20-point stop loss, but the target return for each trade is 50 or 100 points.
This can be said to be a more reliable system type because you need a much lower overall success rate to make money. Let me give an example to prove this:
For example, if you use a 20-point stop loss, but are looking for a 100-point price change per transaction, then you can achieve a sustained long-term profit of only 20 % success rate. Therefore, for every five transactions you open, you may have four losses. Only one transaction is successful because you will still be 20 points ahead of time. Obviously, if you want to increase the overall success rate to 40%, then you will be able to get 140 points of profit from every five transactions.
So the problem is that there are two main ways to create your own profitable trading system. You can use the same number of points to calculate the target price and stop loss, and look for a simple system that has at least 51% of the time to get a successful deal, or you can get more for each trade. In order to make money, the success rate of the system is much lower. Both systems have their advantages.
[ad_2]
Orignal From: Designing Foreign Exchange Trading System - 2 Different Methods
No comments:
Post a Comment